Cineworld shares spiralled 53.8% to 4.5p in early afternoon trading on Friday on reports that the cinema chain would be filing for bankruptcy.
The news was broken by the Wall Street Journal, citing sources close to the matter.
“This would mark the end of the road for the indebted cinema chain, who has around £4bn worth of debt before factoring leaseholder liability and annual revenues of under £1.5bn,” said XTB chief market analyst Walid Koudmani.
“Talks over recent weeks to restructure the debt through a deleveraging transaction are likely to have failed.”
Cineworld has apparently hired lawyers from Kirkland & Ellis LLP and AlixPartners as consultants to guide the company through the bankruptcy proceedings.
The film chain reported earlier this week that it was looking down the barrel at grim finances, with recent admission levels “below expectations.”
The business blamed a dearth of big picture releases since the franchise reopened post-Covid, with films including Top Gun: Maverick and Thor: Love and Thunder failing to attract booming customer levels back to theatres.
“The firm will blame the lack of summer blockbusters as a reason behind its sharp downfall but in reality its aggressive acquisition plan has taken on too much debt and this was always a huge risk as interest rates rise,” said Koudmani.
“Moreover, the move to stay at home entertainment and streaming providers has created a pivotal shift in the way consumers enjoy films and Cineworld simply has not adapted fast enough.”
“It’s all quite sad as the UK’s high street will now likely lose a popular and familiar brand name.”
Cineworld has not commented on the Wall Street Journal report at the time of writing.
